The downwards slope indicates a negative association between pace and performance

The best performance years - 2004, 2005, 2006 and 2007 - slower pace of internationalization

Foreign integration has higher effect Pace of Starbucks’ internationalization 1993 - moderate pace, 2nd lowest ROA, 115% increase in firm assets (opening a second roasting plant)1997 and 1998 – high pace, moderate ROA, acquired Seattle Coffee Company in UK (65 stores already generating revenue)2001 – high pace, ROA = 10.85%, new expansion strategy, opened a total of 337 stores (252 in UK) Pace of Starbucks’ internationalization Rhythm – the regularity by which stores were opened abroadMeasured by the Kurtosis of the number of foreign stores over each four-years periodA higher Kurtosis implies a more irregular rhythmLower Kurtosis implies a more regular rhythm with higher ROA Rhythm of Starbucks’ internationalization First two blocks (1994-1997 and 1998-2001) – irregular rhythm, high growth (more countries entered) and lower performance1994-1997 – domestic- regular, foreign – irregular; so, foreign expansion had higher effect Second two blocks (2002-2005 and 2006-2009) – higher performance, regular rhythm2002-2005 – the highest ROA.2006-2009 – lower ROA with regular rhythm, because of economic recession and intensifying competition Rhythm of Starbucks’ internationalization Geographical scope – the number of new countries entered

The downwards slope implies a negative association between slope and returns, in our situation flatFirst three years of analysis (1993-1995) company operates just in the US and CanadaToo close location to each other Geographical scope of Starbucks’ internationalization 1998 – high scope, according to the pace acquired Seattle Coffee Company in UK2000 – higher performance with high pace, low country growth2008-2009- low country growth, lower performance because of economic recession Scope of Starbucks’ internationalization 1998 – high scope, according to the pace acquired Seattle Coffee Company in UK2000 – higher performance with high pace, low country growth2008-2009- low country growth, lower performance because of economic recession Scope of Starbucks’ internationalization Industry Sales Growth Rate Low High Low High Relative Market Share Position Boston Consulting Group (BCG) Matrix 2008 – 2010 – closed nearly 1,000 stores Results:$580 million in cost savings Affected earnings by lease termination and severance cost70% of the stores were re-opened for fewer than 3 yearsPace, Rhythm and Geographical scope - process dependence in building a profitable MNEs Rationalization Program Revenue Current Situation Threats of new entrantsThreats of substitutesBargaining power of suppliersRivalry among existing competitorsBargaining power of buyers Porter’s Five-force model PEST Analysis Beginning of 1990s 1st move to Canada1993-2007 Starbucks’ 17000+ stores in 56 countries1993 revenue $ 16 million2007 revenue $10 billion Takeover and acquisition of local community coffeehouses and buildingsWholly-owned subsidiary, joint venture, licenseeIn March 2003 Starbucks’ name on “Fortune 500 companies” (position 465) Starbucks’ internationalization Beginning of 1990s 1st move to Canada1993-2007 Starbucks’ 17000+ stores in 56 countries1993 revenue $ 16 million2007 revenue $10 billion Takeover and acquisition of local community coffeehouses and buildingsWholly-owned subsidiary, joint venture, licenseeIn March 2003 Starbucks’ name on “Fortune 500 companies” (position 465) Starbucks’ internationalization-Agressive or Progressive? 1. Industry-basedLimitation of expansion in US marketPotentiality due to population sizes and the amount of people with high disposable income and with a high interest in Americanization.Advantage in its innovative strategies of healthier snacksUSA’s membership in NATO, APEC, NAFTA and Pacific Community trading blocks, helped Starbucks get raw materials cheaper

3. Institution based viewsThe main stakeholders in Starbucks are the employees, owners, suppliers and the customers The motives to go abroad can be analyzed from three different perspectives: High end coffee

Good public image

Industry leaders

Wider demographic reach Strengths Over-priced

Non committal to customization

No Back up plan Weakness Niche markets

Market Share at lower prices

Diversify their business Opportunities Sudden influx of competitors

Cheaper pricing by competitors

Coffee Selection

Popularity of Coffee might die down Threats Franchising

Licensing

Joint Venture

Fully owned subsidiaries Entry Modes Promotion and AdvertisingProduct differentiationVarietyLoyalty program and rewards cardDrive throughCorporate market expansionFocus on developing markets Focus Points Early-adopters in favour of a club-like atmosphere found themselves in a Minority.Too many new products to broaden appeal.Tried to gain a share of the ‘grab and go’ market without upsetting the premium coffee experience. Do you think that the growth of Starbucks has destroyed its Brand Value? November 2011: Starbucks acquires Evolution Fresh Inc. and opened Juice Bar.June 2012: Starbucks to acquire Bay Bread, LLC.December 2012: Aggressive expansion plans. Open 500 stores in the America’s, 400 in Asia-Pacific and 100 in EEMA.Transition in retail of CPG from In-House to Direct Distribution Starbucks in the News... First two blocks (1994-1997 and 1998-2001) – irregular rhythm, high growth (more countries entered) and lower performance1994-1997 – domestic- regular, foreign – irregular; so, foreign expansion had higher effect Second two blocks (2002-2005 and 2006-2009) – higher performance, regular rhythm2002-2005 – the highest ROA.2006-2009 – lower ROA with regular rhythm, because of economic recession and intensifying competition Rhythm of Starbucks’ internationalization Industry Sales Growth Rate Low High Low High Relative Market Share Position Boston Consulting Group (BCG) Matrix 1998 – high scope, according to the pace acquired Seattle Coffee Company in UK2000 – higher performance with high pace, low country growth2008-2009- low country growth, lower performance because of economic recession Scope of Starbucks’ internationalization 1993 - moderate pace, 2nd lowest ROA, 115% increase in firm assets (opening a second roasting plant)1997 and 1998 – high pace, moderate ROA, acquired Seattle Coffee Company in UK (65 stores already generating revenue)2001 – high pace, ROA = 10.85%, new expansion strategy, opened a total of 337 stores (252 in UK) AGENDA Introduction History of StarbucksPace and Rhythm of Starbucks internationalizationFuture of InternationalizationQuestions and RecommedationsRecent Trends